The very large, but permanent and worsening, budgetary impact of the “Bush tax cuts” — which when first proposed back in the pre-9/11 era, were supposed to end in 2010 and were in response to what back then seemed to be the “problem” of a burgeoning surplus in federal accounts! Since “extending” those cuts just sounds like business as usual, I think it is hard for most people to envision the profound and growing effect they have. The chart above helps toward that end — and doesn’t even go into how heavily those cuts are skewed to the “haves” of society.

And, as a bonus half-point, the chart clarifies that budget problems would be on the path to self-correction, if the Bush cuts had lapsed as originally planned.

Look carefully too at the net impact of the wars on the deficit. What the chart doesn’t tell you though is the ancillary costs of the wars-in increased energy prices, transportation costs, unecessary expenditures for current operations ( that prevent force modernization) and most importantly the attendant loss of tax revenue associated with those added costs. This burden is being primarily borne by the middle class and not by assholes like Paul Ryan and others who want to sacrifice real people on the altar of supply side Jesus. Combined together, foolish tax cuts with a state of permanent war are doing more to destroy American competitiveness than any other cause. Your friendly neighborhood tea bagger is either too stupid to recognize this, or simply is too selfish to care. ( “I’ll take option two, there, Alex”).

“But the debt is robbing our children!”

Oh really? Then how do you explain the fact that without doing anything except letting the Bush tax cuts expire-the debt stabilizes? Thus allowing-if you reform the tax code and make some vertical spending cuts ( including Defense) the debt to go down. Without sacrificing Medicare or Social Security.

Sorry URR-this what you and the rest simply don’t get. It is not, “that the government is taking your hard earned money”-it is that it is misdirecting the money from the programs that make the most impact on the most Americans and using it to enhance the earning prospects of the top 1%. And all the whining about “small business” ignores the fact all companies, large and small are not being held to a standard of contributing to the social welfare of the nation. Like it or not-if you want to “control spending” someone has to address the growing income inequality. If for no other reason than the fact that in the long term-it restricts growth a heck of a lot more than any one particular government policy or regulation. In fact-it was the lack of regulation that created the need for TARP and the recession in the first place.

Any who talks about “sacrifice” and “cutting spending” without including tax reform-like John Boehner does-is telling you a lie. We can fix the financial mess we are in-without forgoing the investments that make America a better and different nation, but it requires and honest conversation about what is and is not “shared sacrifice” Boehner in his effort to suck up to the Tea Party is not doing that.

John Boehner’s new line on the deficit negotiations is that raising taxes — by which he appears to also mean closing tax expenditures — “is off the table. But everything else is on the table.” This is a bit like telling your doctor, who’s worried that you’ve gained weight and are out-of-shape, that exercise is off the table, but everything else is on the table. Well, it’s nice that you’re prepared to diet, but you need to exercise, too. Otherwise, you’re not going to get where you need to go.

And without revenue, we’re not going to get where we need to go — at least if you think where we need to go is towards a balanced budget. Over the past 10 years, the Bush tax cuts have increased the deficit by about $1.3 trillion. They’re the single largest policy contributor to our recent deficits. Due to the growth of the economy and the creep of the alternative minimum tax, they’ll cost the Treasury closer to $4 trillion over the next 10 years. They’re the single largest policy contributor to our projected deficits.

So here is a way to curb this loss of revenue without eliminating any individual deduction: limit the total tax saving for any individual to a maximum percentage of his total income. Daniel Feenberg of the National Bureau of Economic Research, Maya MacGuineas of the New America Foundation and I have been studying a reform that would cap the tax reduction that each taxpayer could get from tax expenditures to 2 percent of his adjusted gross income.
What’s the result? Taxpayers with incomes of $25,000 to $50,000 would pay about $1,000 more in taxes; those with incomes of more than $500,000 might pay $40,000 more.
The cap would affect more than 80 percent of taxpayers. Although they would continue to benefit from the mortgage deduction, the health insurance exclusion and other tax expenditures, their tax savings would not increase if they took out a larger mortgage or a more expensive insurance policy. Similarly, they would not be penalized and get a lesser tax benefit if they scaled back their mortgage or their health insurance premium by moderate amounts.
[...]
We found that a 2 percent cap on tax expenditures in 2011 would raise tax revenue by $278 billion—nearly 30 percent of total projected income tax revenue for this year. The extra revenue would increase over time, reaching nearly half of the projected future fiscal deficits.

We are going to have to do it sooner or later-might as well get on with it now. That’s less “socialist” than the current system of corporate welfare.

Phib-that’s what your readers would be better off understanding. Sadly, thanks to the noise machine of the right, it would appear fewer and fewer of them are able to.

24 Responses to “The next time someone says…..”

Mighty considerate of you to give me the economics lesson. I am curious, though. When you use the phrase “misdirecting the money”, I assume you are referring to the taxpayers’ money. Though it seems as if you are considering it “the government’s money”. And that not confiscating yet larger amounts from those who already pay proportionately much higher taxes than average to give to the group you label “most Americans”, seems, in actuality, to be forcible redistribution of the wealth under the guise of “punishing the greedy”.

You couch such a concept in terms of lost revenue to the government, without noting that, without the downturn that began when both houses of Congress, and virtually all economic committee chairs were held by Democrats since 2006, and blame the downturn on Bush. Nor do you recognize that corporate tax revenues will shrink by a proportional amount during any downturn. Unless your solution is to raise corporate taxes, to generate more tax revenue, which can be redistributed to the “poor”, so that industries either go out of business or go overseas, for which those of your ilk will blame corporate greed.

Perhaps my favorite representation is the TARP/Bailout effect, which diminishes sharply, supposedly, as early as this year. Considering the price of Government Motors stock, and the fortunes of other bailout recipients, including Goldman Sachs, whose former senior officers now populate the Obama Administration, let’s see what the “projection” looks like for that in real numbers, and not this Marxist utopian model, in, say, 2012.

I am quite interested in how those estimates are made without knowledge of how will future administrations and congresses manage the budgets?
e.g. next congress might be all Tea Party and vote no taxes at all , with printing money as sole way to finance govenrment (yeah, I’m just exaggerating)
What would be of more interest to me is quite obviously, the record of past years.
And why is it so sure”recovery measures” will end so soon?
Also projecting the wars into 2019 is quite absurd. This way or another they will end by 2015, and probably faster.

Regarding the wars I would take issue with you. Given the recent appointments of the Obama administration ( especially) King David, the wars are going to go on and on and on. As any attempt is made to request a drawdown-the neocons are going to come out of the closet saying that we have to stay to “win”. Even though winning was not a possibility a long time ago.

The real issue though is with FY-12-15, where the wars due make an impact. If we did not have them-that would be a far more effective spending cut than anything the current Congress is proposing.

Re: Recovery measures-I think that is a realistic assumption. TARP actually realized a net positive return for the government this fiscal year and the stimulus ends in CY -11. That’s program of record.

Long version: It is not confiscation-for a government to lawfully find a means to provide the support services that giovernments are supposed to provide. Governments exist for many purposes, one of which is to protect the citizens of a country from the unscrupulous acts of very greedy men. They also exist as a mean to pool resources to improve the quality of life for all citizens-not just a favored few.

To that end, it is not unreasonable to ask those who receive more from the economy to do more to help others. Thomas Jefferson and the other founding fathers understood this. “Taxes should be proportioned to what may be annually spared by the individual.” And, as earlier noted, as wealth rises, so should taxes — “geometrically.”

The reason to do so was to protect and develop a thriving middle class-without which there cannot be a functioning democracy. Nothing “marxist” about that.

Now to your specific point-the country could have weathered the dowturn in corporate revenues had it not had the additional burden of the wars and the Bush Tax cuts. The wars because it accelerated the loss of revenue to the government as well as impacted the ability of people to pay other bills. The tax cuts because the deprived the government of a way to fund needed services and activities. Thus the created more of a deficit than was required.

You want to blame Congress-but Congress did not force companies like Goldman Sachs and others to gamble with the nations well being. In reality
the financial crash of 2008 was caused by income inequality. The ever widening-gulf between the rich and the poor-created the appetite for credit, and that, in part, is why greedy bankers capitalized on it.

And the lack of social services — like health care — made things much, much worse. And its still makes life much worse in this country than a nice place like Japan.

But my argument is not invalid. It is quite rational. What is irrational is your understanding.

I never said anything about avoiding taxes.

Jefferson was advocating ” to he whom much has been given, much shall be required”.

The only thing communist socialist here is your paranoia. Taxes are skewed against the middle class not against the rich. You are forgetting the “bubble effect”. After a certain point-all needs are taken care of-no matter how rich you are. At that point they either invest or deny. The idea is to provide them an incentive to invest.

And how do you explain the fact that back when America had higher tax rates-it did better? Oh yea, no stupid wars.

If anyone try avoiding taxes, he can’t do that, we have a lot of taxes , our luck is that we don’t have big taxes. If they were too big , probably people would be in the streets like in Greece. Anyway, i don’t wanna be a too political explainer so that’s all i want to say.

Again you fracture Jefferson. The statement “much is given” sure as hell doesn’t refer to money that has been EARNED. I don’t work 55-60 hours a week to be “given” my paycheck. I EARN that. And how you skew such, combined with your statement that “all needs are taken care of”, translates directly into the Marxist “from each according to their capabilities, to each according to their needs”.

When you start with the premise, as you have (and Obama has), that the honest accumulation of wealth is somehow wrongfully taking from the collective, you will never get agreement from me that your argument is anything but the socialist-communist class warfare dogma that you always give.

BTW, did you get “pinched” by USCYBERCOM yesterday evening? Seems Galrahn and Salamander did.

I think you are still missing my point. There are many ways to close the revenue gap. The defict commissions ideas about lower tax rates but no loopholes are one, a VAT is another. So would a surcharge on gasoline to pay for the war(s). In each case you control what you pay.

No one is saying you didn’t EARN the money-however to earn that money you live in a society that is interdepent on one another and the services provided to keep the people moving within the country. There is a cost to that-and it is a “cost of business” to enable you to earn the money.

From TR:
At many stages in the advance of humanity, this conflict between the men who possess more than they have earned and the men who have earned more than they possess is the central condition of progress. In our day it appears as the struggle of freemen to gain and hold the right of self-government as against the special interests, who twist the methods of free government into machinery for defeating the popular will. At every stage, and under all circumstances, the essence of the struggle is to equalize opportunity, destroy privilege, and give to the life and citizenship of every individual the highest possible value both to himself and to the commonwealth……
“No man should receive a dollar unless that dollar has been fairly earned. Every dollar received should represent a dollar’s worth of service rendered. Not gambling in stocks, but service rendered. The really big fortune, the swollen fortune, by the mere fact of its size, acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means. Therefore, I believe in a graduated income tax on big fortunes, and in another tax which is far more easily collected and far more effective, a graduated inheritance tax on big fortunes, properly safeguarded against evasion, and increasing rapidly in amount with the size of the estate.”

“No man should receive a dollar unless that dollar has been fairly earned.”

Seems Teddy Roosevelt never met Lyndon Johnson.

We already have a graduated income tax on big fortunes. And an “inheritance” tax.

Wanting to increase those to soak the rich so the government can spend more on social programs (where $.81 of every dollar goes to administration), instead of controlling SPENDING, remains a socialist-communist venture aimed at the punishment of success, with government both defining capabilities and means.

“struggle of freemen to gain and hold the right of self-government as against the special interests”

There can be no endless wars if there is not endless money.
I fail to see why Pertreaus would WANT to continue any war. What would be his motive?
I understand the Bacevich mantra, which you parrot. But the “war’ in Iraq is basically over, though there are some noises to have some US troops stay AND they want to have over 20,000 ‘state department” employees housed and working there in the billion dollar complex but such spending is unsustainable and EVERYBODY knows it, though what they may do is take money from other programs and funnel it to Iraq. (US AID etc)

One quick question. You say “Paul Ryan and others who want to sacrifice real people on the altar of supply side Jesus.” His Medicare plan is based mostly on joint work he did with Alice Rivlin of Clinton era fame. Is she too wanting to sacrifice people?

Rivilin has repudiated Ryan’s plan-because it deviates from the work he did with Rivilin in several key areas. “That’s a reason for me saying very strongly that I don’t support the version of Medicare premium support in the Ryan plan. It’s both because the growth rate is much, much too low, and because it doesn’t preserve fee-for-service Medicare as the default option”

That’s a huge difference-especially in that , as with healthcare, it does not allow people to have a public option, in order to deal with economic problems. Furthermore Ryan’s plan shifts a huge load on to people at a time in their life when they are guaranteed to have to use the plan-its nothing but a gift to insurance companies; they will jack up premiums over the voucher limits as soon as it starts.

Yes they may now have differences, but reasonable people can disagree and often do.

I am probably closer to your overall thinking on such matters (not entirely though), but I absolutely believe that continual dispersions on the motivations of others is absolutely reckless and simply serves to poison the overall effort.

Ryan put his *member* out on the table and in good faith based upon his beliefs. That how the discussion starts. But we get nowhere when any proposal is met with baseless questions on the motivations of the presenter. It’s a complex issue with multiple paths aimed at achieving the same objectives all using modeling (even yours above) that isn’t necessarily accurate over the long term. (BTW, Ryans plan doesn’t use vouchers. That’s been misreported.)

Further, if you think the left doesn’t provide “gifts” to the insurance companies then I would suggest you reconsider. The unholy alliance of Big Business and Big Government knows no party lines.

“The whole modern world has divided itself into Conservatives and Progressives. The business of Progressives is to go on making mistakes. The business of the Conservatives is to prevent the mistakes from being corrected.”
- G. K. Chesterton

Ryan’s budget is not a good faith effort about anything. He didn’t expose anything but his evil heart. He put that budget forth for one reason only -to ring the bell with our Tri Corner hat wearing friends who are now the heart and soul of the GOP.

“Premium Support” is just a voucher by another name-even conservative publications have acknowledged that. The Congressional Budget Office estimates that most future retirees would actually pay more for health care under Ryan`s plan.

Plus, lets get back to the real point of my post-Ryan’s budget is uncecessary -the revenue is out there to start balancing the budget. My point is quite simple-Ryan’s budget makes draconian cuts in the wrong things-to provide tax cuts to the rich. Alice Rivlin understands that very well. That’s been a change in Republican thinking, at least some of it: spending does go through the tax code and reducing that isn’t necessarily a tax increase. So then we started working on radical tax reform and we cut a lot of expenditures. The biggest one is the exclusion of employer-paid health benefits from the income tax, and once we did that, we had quite a lot of money over time, and it even helps you on Social Security because it moves benefits from health care and into wages, which are then taxable in both the income tax and Social Security.

I’ll say it again. Want to cut spending-retrench globally and stop the wars. Repealing the Bush Tax cuts and stopping the wars goes a long way towards fixing the deficit.

“Ryan’s budget is not a good faith effort about anything. He didn’t expose anything but his evil heart.” He put that budget forth for one reason only -to ring the bell with our Tri Corner hat wearing friends who are now the heart and soul of the GOP.

————

I tried, but I have no time for idealogues bent on heated rhetoric. Pity, I wanted to take this conversation further and actually had high hopes.

I thought I was being reasonable-the Ryan budget makes me very angry for a whole host of reasons. It deserves the scorn it has received. I am not sure I understand why-making that statement, somehow makes me an ideologue. Most of my statements are based on factual discussion of the merits ( or lack of merits) of his plane. There is plenty to discuss about that.

But lets not kid ourselves-this is an important issue and therefore I have little patience with those who simply say that tax cuts are sancrosanct and that’s not a reasonable starting position for anyone. Furthermore-you and every other thinking American should be angry with those who would ensure a market meltdown (by not raising the debt ceiling) just to make a point.

Reasonable people can disagree-but they have to start from reasonable points. I maintain my contention that Ryan’s budget is not a reasonable starting point-and the fact that even fellow Republicans cannot criticize it as being radical without getting dumped on proves my point about the party. That’s not “baseless accusations” about the presenter-its a reasonable question as to why they would even try to propose it in the first place.

When I see the other side behaving like they value compromise-then there can be discussion. They are not acting that way however, and until then, one has to find a way to get their attention.

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Skippy-san

Middle of the road kind of guy. Love living in Asia and will be back there as soon as I can. I lived 8 and a half grand and glorious years in Asia traveling from one end to the other and generally having a really good time. Despite my best efforts to stay, I was "Quantum Leaped" to a 3 and 1/2 year exile in the USA to pay for my sins - suffering through the lunacy that is life in the American South. I am now back overseas, living the expat life again, working my way around the world- taking the long way home to Asia via the path of living in Germany. Like Dr. Samuel Beckett, I am hoping my next leap will be the leap that brings me home to Asia. Always on the lookout for my next ex-wife.